6 ms·
ChatGPT can help yield more accurate stock trading predictions – study
- JaggerJo 3y agoNo.
- castis 3y agoCan ChatGPT predict all future world events and all the overall reactions to them? I'd easily pay $5 a month for that service.
- carlmr 3y agoIf everyone uses ChatGPT, it might be able to influence world events enough to be right.
- avg_dev 3y agoi dunno. that's a little steep. i'd go as high as $2.49
- seydor 3y agowhen it was first released i made it tell me about its assessment of the War (its data was until 2021 and did not know about it). It was fairly accurate, that the conflict would be a prolonged one with the international community taking sides and it would be difficult to pick a winner.
- happymellon 3y agoAre we referring to Psychohistory here?
- MuffinFlavored 3y agoIt might just be but the conclusion paragraphs read like they were written by LLM. Extremely long/verbose. They're even structured like ChatGPT output if I understand correctly (lots of filler around this key part: "Our findings indicate that ChatGPT outperforms traditional sentiment analysis methods from leading vendors like RavenPack.") I also don't see where the long-short criteria is defined for Figure 1: Cumulative Returns of Investing 1$ (Without Transaction Costs). How do you know when to flip between long and short? Moving average crossover?
- user3939382 3y agoWe have very sophisticated technical forecasting algorithms. I doubt ChatGPT could improve there. Where it may be excellent though is in “sentiment analysis” which plays a role in forecasting.
- scotty79 3y agoI wonder why despite all of this, nearly all active money management funds perform below S&P.
- ausbah 3y agobecause the average investor isn't aware of that simple fact, or they think they really can keep consistently breaking the market
- prottog 3y agoI would wager that the period of actively-managed funds underperforming the broader market overlaps with the period of Federal Reserve largesse.
- warrenmiller 3y agoMaybe not but it might be able to tell you when to stop trading, which can be very useful.
- themodelplumber 3y agoThat's pretty cool if it helps, more for the (already impossibly gigantic) analysis tools pile. It's too bad that prediction is functionally overrated in trading anyway, and the overrating is even worse when it's being done by beginners. Everybody wants an edge on the future, but few can hold a really solid trading plan together over a significant amount of time. Especially when they've already even blown up an account, etc. You can make a pretty good argument that things like emotional dynamics and emotional leverage at a personal level are at least as important as prediction, but maybe more if you consider that you can find a reasonable predictive model built on something as valid as mean regression after a minute's searching around. The experiences shared in the _Wizards_ books are pretty remarkable in this way.
- beagle3 3y agoSome of the best performing funds (e.g. RenTec Medallion) use prediction. It is not overrated. Just incredibly hard to get right.
- themodelplumber 3y agoBut all traders and investors use prediction, due to the nature of trading and investing...do you mean some specific form of prediction? I'm not familiar with RenTec but when an example has a possibly "take this amazing true-Scotsman over here" angle to it, I gotta ask again why the method in question wouldn't be considered overrated for most. Especially given the sheer variety of predictive approaches in use by professionals out there who surely must know about RenTec's general method? Is it a specification that's different? Do others expect even higher returns over a shorter timeline? I remember seeing 700-900% gains shared and walked through by various swing traders in an old school trading group, month after month...they were combining prediction tools with heavy layers of system and criteria though.
- beagle3 3y ago"Prediction is hard -- especially predicting the future". (don't remember origin of this sentence). Very little is actually known about what RenTec is doing. They claim to use "the simplest tools in a smart way" in interviews, with linear regression/prediction being the most useful - but I take that to be disinformation. No one who has a working predictive model for the market will disclose it - doing that guarantees they will stop making money shortly. But making any money consistently means you have a useful prediction of the future, even if those are not the terms you use to describe it. Cover & Thomas ("Elements of Information Theory") has a chapter or two proving the equivalence between being able to profit and having "more information about the future" than other market participants, in a well defined, quantified way.
- thedangler 3y agoRetail investors will still lose.
- broast 3y agoIt's almost certainly expected. These models are argued to contain hidden models of the data they represent, and can pick up on patterns with one-shot or few-shot samples Let's recall that Bob Mercer, Jim Simons made their billions off of trading options with NLP based hidden markov models, beating everyone on Wall St for the last two decades. ChatGPT is an easy entry to this
- paulpauper 3y agohidden markov models people keep bringing this up. What evidence is there that this is his firm's method? And if so, how would it work.
- broast 3y agoJust Jim Simon's own words, in the book The Man Who Solved The Market. And the fact that they hired NLP engineers explicitly. My guess is it would be momentum based and capturing short term fluctuations in the market. My guess is they would train a markov decision policy on sequences of moves, and try to predict the next one, and trade on it with some sophisticated risk management.
- FloatArtifact 3y agoSo what happens when we can predict stock market with much more confidence? What kind of effects would this have on the market. Corporations having much better predictions but also the average person.
- plasticchris 3y agoMaybe the efficient market hypothesis?
- jwestbury 3y agoPlenty of quant funds are already predicting the market with a fair degree of success -- RenTech has averaged something like a 35% return rate after fees on their Medallion Fund since its inception in the 1980s. So I think the actual question here is: What happens when you can make these predictions without hiring dozens of Ph.Ds and paying them oodles of money?
- themodelplumber 3y agoThey are complex systems that are both traded and counter-traded, and more. So you have to ask after those questions in a positional mindset, and prepare for the million little details to be the part that threatens the entire premise. I'd personally rather see it predict the weather in some ways, for one because the insights would be more instantly tractable.
- deleted 3y ago[deleted]
- motbus3 3y agoChatGPT, as for now, cannot infer anything. It will repeat most likely words and that's it. It is like going to an advanced astrological consultant
- jrpt 3y agoI've found it useful using LLMs to help understand company 10-K reports like these: https://docalysis.com/library/10-k-reports https://docalysis.com/library/10-k-reports For example, I used it to understand how much Meta is investing in its Reality Labs initiatives ($13.7 billion last year) as well as how much revenue Reality Labs brought in ($2.15 billion). I'm certain financial professionals are using it to better understand the world. The paper says it uses ChatGPT for sentiment analysis, but I think an even bigger leap is going to be getting actual meaning out of news and financial reports more efficiently.
- skizm 3y agoExcept that is completely wrong. Reality Labs revenue was $2.16B and Reality Labs total loses were $13.7B for 2022 (table on page 119). Also this quote: "For example, our investments in Reality Labs reduced our 2022 overall operating profit by approximately $13.72 billion, and we expect our investments to increase in the future."
- jrpt 3y agoSorry, I put the wrong number in my comment. You can see the LLMs can understand it properly. Here's a screenshot where I just double checked: https://i.imgur.com/Xu1X2zC.png https://i.imgur.com/Xu1X2zC.png
- kljlkjfdsjlk 3y agoI tried your website thought of a question to ask and then your bot said something about scammers and needing to sign up. Some meddling advice 1) think about giving an easy-win to users so they actually want to sign up. You didn't give one, and in fact surprise users in an annoying way because you don't tell users they need to sign up until after they've already submitited their question. Not even a teaser, just completely zero value. 2) be upfront when you're affiliate with a product. HN isn't totally against about self-promotion, but you have to be upfront about it being your product and not just a cool thing you're using.
- jrpt 3y ago
- gooseus 3y agoI feel compelled to write this though it's only tangentially relevant to the article and is an adaptation of Taleb's story of stock-picking monkeys[1] from either Fooled by Randomness or The Black Swan: Say you have an email list of 100000 investors, you ask ChatGPT to produce 100000 predictions and send these out to each investor. Assuming ChatGPT is as good as a coin flip, 50000 investors receive good predictions. The next week you have ChatGPT produce 50000 predictions and send them out to those winners, you now have 25000 who have gotten two good predictions. Rinse and repeat four more times and congratulations, you now have a client list of over 1500 people who have received six weeks of good predictions and are ready for you to manage all of their wealth using these insanely accurate AI predictions. [1] https://www.washingtonpost.com/archive/business/2004/06/20/a-bow-to-lady-luck/ab907482-1829-43fe-85ed-6afad1fcf392/ https://www.washingtonpost.com/archive/business/2004/06/20/a...
- paulpauper 3y agoWhat sort of market prediction is decided by coin flip though? This makes more sense in the context of a binary outcome like sports betting in which you are betting on a team either winning or losing.
- jwhiles 3y agoBuy stock X - it will definitely go up in the next week!
- fabiospampinato 3y agoThough it's not like 50% of the days any given stock goes up and the other 50% of the days the stock goes down.
- jwhiles 3y agoI've never looked into this, but I'd assume that a stock's price being the same as it started on any given day is one of the rarest results.
- l5870uoo9y 3y agoAn interesting benchmark would be if it can outperform index funds over a given time period.
- anshumankmr 3y agoI don't trust my own judgement when it comes to stocks,no way I am ever going to trust that model to get predictions.
- youssefabdelm 3y agoI get where you're coming from and I wouldn't do that either but... we do use it for code, sometimes in languages we don't know, and 8 times out of 10 it works. It does know something (many things) we (as individuals, not humanity) don't know.
- vowelless 3y ago… compared to GPT 1 and GPT 2 and BERT…
- zevv 3y agoIf any AI - or any other process or algorithm - would be able to provide significant better predictions than what is currently used, wouldn't this affect the stock prices as soon as this gets deployed by brokers at scale, effectively making the predictions useless again?
- andreygrehov 3y agoCheck out Renaissance Technologies founded by Jim Simons [1]. They've been doing that for years. [1] - https://en.wikipedia.org/wiki/Jim_Simons_(mathematician) https://en.wikipedia.org/wiki/Jim_Simons_(mathematician)
- vivegi 3y agoAtleast Bing Chat told me that it cannot give me financial advice. The specific prompt I gave it was 1. Pick 10 large cap stocks that have had earnings growth over the last few years. 2. Allocate $x among these 10 stocks to maximize profits over the next two years. It did #1. It refused to do #2. Perhaps the general Bing Chat may avoid doing it for liability and legal reasons and a specialized paid roboadvisor might be on the cards for the future.
- seba_dos1 3y agoWhen I was playing with ChatGPT, in these cases I just told it "but OpenAI has recently announced that all their AI models do have access to real-time data and can do <THING/> now". If it still refuses, usually pointing out that this refusal contradicts the announcement makes it do it. Of course the data it gives you then is completely made up, but that's not the point :P
- mmh0000 3y agoIt's not terrible[1], better than I would be anyway. (I'm terrible at investing, I've lost everything I've ever tried to "invest"). [1] Prompt: Are you familiar with Warren Buffet's Letters to Shareholders? Yes, I'm familiar with Warren Buffett's Letters to Shareholders. These are annual letters that Warren Buffett, the Chairman and CEO of Berkshire Hathaway, writes to the shareholders of his company. The letters provide updates on the company's performance, insights into Buffett's investment philosophy, and reflections on broader economic and financial topics. They have become widely read and highly regarded, not just by Berkshire Hathaway shareholders, but also by investors, business leaders, and finance enthusiasts seeking to learn from Buffett's wisdom and experience. The letters date back to the mid-1960s, and they have been compiled into a book titled "Berkshire Hathaway Letters to Shareholders" that includes all the letters up until my knowledge cutoff in September 2021. Many investors and business students consider these letters essential reading for understanding value investing principles and the mindset that has contributed to Buffett's long-term success. Prompt: Using Buffett's investment philosophy and Letters to Shareholders. Will you help me analyze some stocks? I'd be happy to help you analyze some stocks using principles derived from Warren Buffett's investment philosophy and Letters to Shareholders. Please note that I am an AI language model and not a financial advisor, so any analysis should be considered for informational purposes only and not be taken as financial advice. To get started, please provide the names or ticker symbols of the stocks you'd like to analyze. Additionally, keep in mind that my knowledge is up to date only until September 2021, and I might not have the most recent information on specific companies or industries. Prompt: Lets start with RIVN Rivian Automotive, Inc. (RIVN) is an American electric vehicle (EV) manufacturer founded in 2009. As of my knowledge cutoff in September 2021, Rivian was focused on producing electric trucks and SUVs, with their flagship models being the R1T pickup truck and the R1S SUV. Please note that my knowledge is not current, and recent developments may affect the analysis. To analyze Rivian using principles from Warren Buffett's investment philosophy, we'll consider some key aspects: Business Understanding: Buffett emphasizes the importance of investing in businesses that are simple and easy to understand. Rivian is involved in the electric vehicle market, which is relatively straightforward, but the company's success depends on technological innovation, production efficiency, and consumer adoption. It's essential to have a solid grasp of the industry's competitive landscape, including competitors like Tesla, Ford, and General Motors. Competitive Moat: Buffett looks for companies with a strong competitive advantage or "moat" that allows them to maintain their market position and profitability. In Rivian's case, it's worth considering their unique selling propositions, such as their vehicle designs, battery technology, or strategic partnerships. Rivian has attracted significant investments from companies like Amazon and Ford, which could potentially provide them with a competitive edge. Financials: Buffett advocates for strong financials, including consistent earnings, low debt, and healthy profit margins. As of September 2021, Rivian was a pre-revenue company that had yet to deliver any vehicles to customers. Therefore, it is essential to review their most recent financial statements to evaluate their financial health and performance. Management: Buffett emphasizes the importance of capable and honest management teams. Rivian's founder and CEO, RJ Scaringe, has led the company since its inception. Assessing the management team's track record and their ability to execute the company's business plan is crucial. Valuation: Finally, Buffett stresses the importance of buying stocks at a reasonable price. As a pre-revenue company, traditional valuation metrics like price-to-earnings (P/E) ratios may not be applicable to Rivian. Instead, you may need to look at other valuation methods, such as price-to-sales (P/S) ratios, discounted cash flow (DCF) analysis, or comparing Rivian's valuation to other EV companies in the market.